Inventory management is one of the biggest factors to becoming a successful manufacturer, but most companies overlook a critical step: prioritizing their inventory. Without understanding the characteristics of your inventory, it will be nearly impossible to focus your efforts, navigate inventory turnover and expand your brand. Learn how to prioritize your inventory and what it can do for your business.
Why to Prioritize Your Inventory
While it is tempting to think of all of our products as equal, different items (or item types) are more important than others for the success of a business. Some of your products probably make you far more money than others. Some of your products are probably much more closely associated with your brand. Prioritizing your inventory is about understanding these and other factors involved in the value of your goods. We will focus on prioritizing items based on two factors: 1) how to prioritize to manage inventory turnover 2) a product’s value to your brand.
Managing Inventory Turnover
It makes no sense to have one generic stocking policy or to manage all your portfolio items in the same way. Critically evaluate your inventory to understand which products you should prioritize when stocking. You can begin prioritizing your inventory for stocking based on the following characteristics:
- Value (revenue or profit margin)
- Cost to sell
- Demand volatility
- Pick frequency
As you can imagine, many of your products will have similar characteristics to one another. It’s critical that you classify items of your inventory into groups, to allow you to manage items with similar characteristics in the same way. Doing this work is critically important, but it can be a lot to set up and maintain if you don’t know what you are doing. Fortunately, Datix is here to help. At Datix, our team of experts can ensure that your ERP is set up to handle prioritizing inventory using the inventory categorization method that makes sense for your business. As a business-first organization, our team takes the time to learn exactly what your company needs, so we can take the stress out of reaching your goals. With an ERP tailored for prioritizing inventory, optimizing your inventory levels will be a breeze.
How Inventory is Tied to Your Brand
Once it is easy to analyze key characteristics of your items through your ERP, it is important to objectively take a hard look at your products. Is every item that you sell really helping your bottom line, or are some taking time and resources away from the true focus of your business? It is possible that some items may offer less value but are strongly associated with your company. These products are likely richly tied to the initial success of your company and its past, but it is necessary to think about what products will take your organization into the next phase of its development. What is your vision for your company’s future? Assessing your inventory based on how they fit (or don’t fit) into that future is a challenging, but it is a necessary step for organizations to reach new heights. If you are uncertain about what direction to take for your company’s growth, consider talking to a trusted consultant like those at Datix. With 25 years of experience assisting manufacturers, our team is well-versed in acting as nonbiased advisors to aid our clients’ progress and continuous improvement. No matter where your business is going next, Datix can support you along the way.
Prioritizing your inventory makes optimizing inventory levels, navigating inventory turnover, and expanding your brand far easier. Yet, it is only one way an ERP can support inventory management. Discover the other ways an ERP can align your business processes with your software.
With over two decades in the industry, Datix is the ERP consultant of choice for manufacturers and distributors. We believe in “being the best with the best” and look for partners who match our commitment to solving real issues and doing what it takes. Our in-depth analysis of our clients and their business needs allows us to maximize their software investments to the fullest.